We lower the forecast for this year and next because of the persistent shocks to manufacturing demand and we now see more downside than upside risks. Manufacturing production will decelerate rather than accelerate this year. Production increased 2% last year and we forecast growth of only 1.1% in 2016, 2.4% in 2017, and 2.5% in 2018.

Productivity growth in the computer and electronic products subsector, once the principal driver of productivity performance in the manufacturing sector, has experienced significant waning in recent years. Consequently, the U.S. manufacturing productivity outlook has become murky. This is a challenging trend for our society, because increased productivity growth helps lift living standards. The good news is that empirical evidence put forth in this paper shows that innovation and capital investment play a key role in accelerating multifactor productivity growth (i.e., output per unit of a combined set of inputs including labor, materials, and capital) in a wide range of manufacturing industries.

The United States produces the most goods and services in the world.

U.S. manufacturing rebounded from the recession faster than the rest of the economy. The sector is highly profitable and continues to expand. And U.S. industrial wares remain globally competitive, as rising inbound foreign investment testifies.

The bottom line is that the size of the overall manufacturing pie keeps expanding. In the 14 years ending in 2013, industrial production increased more than 30%. In 2013 alone, manufacturers generated almost $2 trillion worth of value-added.



The U.S. trade deficit in manufactures soared by 30% in the first quarter, inflated by weather and a West Coast dock strike, and then adjusted to a lower 15% increase in the second quarter. The trade deficit is technology-intensive manufactures rose by 19% in the first half of 2015, resulting in a loss of 300,000 American manufacturing jobs.

The family unit is undergoing dramatic change in both advanced and developing economies. Rising shares of never-married men and women, climbing divorce rates, and the decades-long increase in the phenomenon of men and women living alone has led to a growing global incidence of households populated by single parents and single individuals without children. The manufacturing implications of global family change are many, with impacts being felt in a wide range of industry sectors, particularly automobiles and food.

This paper compares Germany’s Industrie 4.0 with the Industrial Internet Consortium (IIC), both of which advance the Internet of Things. The German approach supports the country’s industrial SMEs in their future adoption of cyber-physical systems while the scope of IIC research stretches beyond manufacturing to include other sectors. The German project is part of government-funded industrial policy whereas the IIC is driven by private companies and research institutions from many countries.

The combination of the first quarter’s huge increase in the U.S. deficit and the higher dollar’s adverse impact on price-sensitive manufactures presents a grim outlook for U.S. manufacturing production and jobs for 2015. Other countries’ mercantilist policies also pose a problem for U.S. export competitiveness.

U.S. manufacturers, already burdened by weak demand for their exports and an uncertain climate for domestic U.S. equipment investment, are now grappling with the significant issue of global price competitiveness. The broad trade-weighted dollar appreciated by nearly 10% in relative price-adjusted terms between April 2014 and April 2015. While this is small relative to historical experience, the increasing global exposure of the U.S. manufacturing sector and the frustrating persistence of weak world demand likely make the current greenback challenge for U.S. manufacturers painfully comparable to previous dollar spikes.

A significant lag in capital investment since the end of the dot-com bubble in 2000 is a major contributor to lower productivity growth and economic growth.

Lower oil prices at the gas pump and elsewhere mean more purchasing power for U.S. consumers and provide a relatively positive near-term economic outlook, according to a MAPI Foundation report.